$MA trade

5 nov:

Mastercard was down 7 bucks or so with it being down 6 or so the day prior, I have MA on my watch list but don't follow it that closely to tell you why it was down. did see an upgrade price target to 320 I believe. good earnings were a few days prior. regardless a good catalyst for a short put entry is the stock moving down rapidly, options prices go up, IV goes up.. that event gets me looking for a support level that I can shoot against with my strike selection and still get decent premium. have some near term support around the 260 area so with the stock at 268.50 or so I went out to the next weeks expiration and sold the 260 put (cash secured put). was near 19delta. which means a 81% probability that stock is above 260 at expiration.

as of nov 8 3days later the stock closed at 274ish and that short put was priced at .25 during the day. closed it for 80%+ of max profit.

Again, my rule is to only sell short puts (naked puts) (cash secured puts) on stocks im ok owning if for some reason I had to be "put" the stock.

also the support level determines which strike I chose, not the premium. im not just selecting random strikes because the premium is a certain amount. in these situation the delta of the option was in the range that I typically target, that being 20-35delta. leaving some money on the table of course by not picking a tighter strike for more premium but ive been more successful if I stick to my targets (support level and delta range)

closed the position with .25 premium left in it but can use that buying power elsewhere for a new position with greater premium vs trying to milk the last 25 cents for another week.

green arrow marks the entry point to this trade on 5 nov